The Employment Cost Index, the broadest measure of labour costs, increased 0.6 per cent after an unrevised 0.6 per cent gain in the third quarter, the Labor Department said on Friday.

The increase was in line with expectations. Wages and salaries, which account for 70 per cent of employment costs, also rose 0.6 per cent in the fourth quarter after a similar gain in the prior period.

In the 12 months through December, wages and salaries increased 2.1 per cent, still below the three per cent threshold that economists say is needed to bring inflation closer to the Federal Reserve's two per cent target.

The ECI is widely viewed by policymakers and economists as one of the better measures of labour market slack. It is also considered a better predictor of core inflation.

The ECI report showed benefits increased 0.7 per cent in the fourth quarter after rising 0.5 per cent in the third quarter. In the 12 months through December, benefits were up 1.7 per cent.